What’s In A Number: Can We Meet UN Poverty Reduction Goals?

The numbers in the recently released UN Millenium Development Goals Report are a case in point. Among its key findings, the report tells us that “the proportion of people living in extreme poverty has been halved at the global level. In developing regions, the proportion of people living on less than $1.25 a day fell from 47 per cent in 1990 to 22 per cent in 2010. About 700 million fewer people lived in conditions of extreme poverty in 2010 than in 1990.” A UN High-Level Panel report touts the progress made in the last 13 years as “the fastest reduction in poverty in human history.” In essence, the prevailing consensus is that Millenium Development Goal 1, the reduction of extreme poverty and hunger by half, is already accomplished. But are the numbers really so clear?

The actual numbers on poverty look significantly grimmer–1.29 billion people in 2008 lived below $1.25 a day; 2.47 billion people in 2008 consumed less than $2 a day. At the current rate of progress, there will still be around 1 billion people living below $1.25 per day in 2015. Most of the 649 million fewer poor by the $1.25 per day standard over 1981-2008 are still poor by the standards of middle-income developing countries.

It turns out that the seemingly simple question of how we measure the number of poor people in the world is surprisingly difficult and extremely important to answer. It affects how we report success, especially considering that the post-2015 talks now dare to speak openly about the goal of complete poverty eradication. In April, at a press conference during the Spring meeting of the international financial institutions in Washington, DC, the president of the World Bank, Jim Yong Kim, pointed to 2030 as the global target year to end poverty. President Obama expressed similar sentiments in February, when he promised that “the United States will join with our allies to eradicate such extreme poverty in the next two decades.”

So, how much has actually been accomplished? Thomas Pogge, the Director of the Global Justice Program and the Leitner Professor of Philosophy and International Affairs at Yale University, makes an important insight—the way that extreme poverty and hunger are measured has shifted over time, and significantly. In other words, some of the madness definitely lies in the method—measurement shifts have taken place, perhaps under the radar of public knowledge and only noticeable by economics geeks. This is inherently confusing. When we claim success, we should know what we have actually accomplished.

In September 2000, the heads of 147 governments pledged that they would halve the proportion of people on Earth living in the direst poverty by 2015, using the poverty rate in 1990 as a baseline. Here Pogge points out something largely glossed over: as with the hunger target, the so-called success over recent years owes much to the back-dating of the base year from 2000 (UNGA Millennium Declaration) to 1990. More specifically, the goal set at the World Food Summit in Rome in 1996 was to halve the number of chronically under-nourished people between 1996 and 2015. That criterion quickly changed at the 2000 meeting to “halve, by the year 2015, the proportion of the world’s people whose income is less than one dollar a day and the proportion of people who suffer from hunger.” Changing the language to refer to a proportion instead of an outright number and backdating the goals to 1990 changed the picture and made the goals easier to reach. Another modification changed the definition to refer only to people in the developing world. Dr. Pogge explains, “…there are two different shifts: (a) shifts in what is to be halved by 2015 (number of poor, proportion of poor in world population, proportion of poor in population of the developing world) and from what baseline (1996, 2000, 1990). (b) Shifts in how persons get identified as poor (average household income below $1/day in 1985 US-dollars, below $1.08/day in 1993 US-dollars, $1.25/day in 2005 US-dollars). These methodological revisions entailed substantial shifts in the number of poor, in their geographical distribution, and, most importantly, in the global poverty trend.” The back-dating of the year allowed for the international institutions to count the significant progress China had made in poverty reduction.

Another major methodological issue is how poverty is measured, using an international poverty line (IPL), and the resulting overreliance on what Dr. Pogge calls a “money-centric” measure set by the World Bank. “In contrast to a human requirements-centered approach, the Bank has set a relatively arbitrary international poverty line (IPL) defined in abstract money units and translated into local currency amounts that it deems to be ‘equivalent.’” The poverty measurement’s excessive sensitivity to the IPL level has a significant impact in how we measure progress, as it provides a very narrow definition of poverty. At $1.25/day, according to PovcalNet, we are 22.4% ahead of meeting the goal. But with $1.50/day, we are only 8.5% ahead, and with $1.815/day we are 5.7% behind. The choice of base year that the progress is measured from is an equally important consideration. Another distortion comes from the use of general consumption PPPs. The general-PPP (purchasing power parity) equivalent to $1.25 (2005) in a typical poor country buys only as much food there as $0.83 bought in the US in 2005. So, the World Bank’s poverty line is too low to cover basic needs. The Bank’s very low line overlooks a lot of very poor people. It counts as poor in 2010 only 1,214.98 million people. The rather narrow IPL measure also disregards intra-household income distribution by looking at the household as a whole, nor does it account for other dimensions of poverty such as the leisure time/labor time ratio, public goods, and climate.

So how can we get around this statistical quagmire and properly measure a very human problem — living in dire poverty. Dr. Pogge suggests that it is crucial that we “define precisely in advance the goals and targets the world is committing itself to as well as the methods by which progress toward these targets is to be measured or assessed,” to prevent midstream revisions and back-dating of targets. He also advocates that the monitoring of progress be left to groups of independent experts, not to international agencies, which are politically exposed. Ultimately, the new agenda should be a lot more participatory, inclusive, and responsive to those directly affected by poverty and social injustice.